
Traders have been increasingly eager to speculate on the future direction of interest rates. The volatility implied by options on 2-, 5-, 10-, and 30-year Treasury notes and bonds has lifted the Merrill Lynch MOVE Index above 110. For perspective, note that the recent high of 116 occurred on May 6, the infamous “flash crash” day. Despite the well-known concerns many have about the complexity of leveraged ETFs and options on them, speculators haven’t hesitated to express their…
Fri, Aug 27, 2010
In addition to the spate of disappointing headline economic numbers this week, there’s been an effusion of bearish sentiment in the news. The doom and gloom first buzzed my radar on Saturday, with the New York Times story, “In Striking Shift, Small Investors Flee Stock Market”. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group.…
Wed, Aug 25, 2010
This is one of those off-message rants that marks, I guess, one of the real differences between “blogs” and “old media,” and if you’re only here for the options stuff, you can skip this post. From 1990 to 2006, the GDP share of the financial sector in the broad sense increased in the United States from 23% to 31%. -Már Gudmundsson, Bank for International Settlements, 2008 This point has been made many times before – and…
Fri, Jul 23, 2010
People are excited about tail risk. On the institutional side, banks and asset managers are packaging up complex, multi-asset hedging products and selling them to pension funds, endowments, and other natural longs. On the retail side, Barclays and others are getting great traction with products like VXX, VXZ, VXX options and now XXV (see Bill’s helpful overview of this space). I’m hoping to join the fray, too, with a managed account program and subscription product set to launch…
Wed, Jul 21, 2010
The Calendar Options second-quarter return trounced the S&P 500 as well as VTY (link below). Our Model Portfolio return was 15.46%, compared to –3.65% for the S&P and nearly –4% for VTY. Overall, market conditions differed little from the first quarter, so it looks like our latest strategy refinements are proving successful. Nevertheless, we continually use feedback from our monthly, quarterly, and annual results to improve the strategy and adapt it to long-term changes in market conditions (more about this…
Tuesday, August 31, 2010